The process of sowing the seeds of electric vehicle infrastructure — and thereby creating a backbone of charging stations that can support these vehicles — is still in its infancy. A new report outlines the technologies and business models necessary to ramp up growth in the electric vehicle (EV) market in the United States. It also explores the relationship between charging stations and consumer purchases of EVs.
EVs are becoming an increasingly large part of our clean energy economy and are a vital element of sustainable transportation. Because of the many societal and environmental benefits of increased EV ownership, governments have instituted policies to encourage consumers to buy EVs.
The prices of EVs are declining. Their ranges are becoming longer. And distributed generation is making it possible to use locally-sourced renewable energy to power EVs.
But despite substantial growth in the market during the past five years, EVs still make up a small percentage of the cars on the road in the United States.
A Lack of Infrastructure
Creating policies to facilitate the expansion of EV charging stations can be challenging. One obstacle is the low current rate of EV ownership and the resulting limited usage of public chargers. Building up higher station usage is necessary for EV infrastructure to become more financially viable and therefore become widespread.
Some have said this presents a chicken-and-egg problem: should policymakers incentivize EV purchases first or invest in charging stations first?
Our work has indicated that this is not necessarily the case. Our analysis suggests that the best way for policymakers to facilitate the growth of the market is to grow electric vehicle purchases and allow the private sector to provide charging infrastructure.
Over 90 percent of charging occurs at homes or workplaces, not at public stations. Also, market participants are likely to respond to the presence of EVs by installing electric vehicle supply equipment (EVSE).
Therefore, encouraging consumers to purchase EVs may be a better approach than funding public charging stations. This will create a cycle of market growth. Encouraging EV purchases will increase the use of charging stations and make the market more profitable, leading to further expansion.
Real-world examples have demonstrated that if EVs are on the roads, the private market will invest in local charging infrastructure. Market participants including utilities and automobile OEMs have a lot to gain by investing in charging infrastructure to support EV drivers.
The core message, then, is that governments looking to expand EV infrastructure should spend their policy dollars encouraging EV purchases rather than constructing charging stations. This type of policy intervention ensures that EVSE will be installed in areas that will receive relatively high traffic. It also ensures that EVSE will be used and maintained at an optimal level.
A Blueprint for Progress
At the same time, there are important roles that governments can play in facilitating the development of a more robust EV charging infrastructure. While we recommend starting with encouraging EV purchases, the policy groundwork to support private investment in EVSE must also be in place.
This report contains a description of the EV and EVSE market in certain states, a financial model for market growth, and recommendations of new approaches to expanding the market.
We compare EV and EVSE policies in New York to those of two leading states, Georgia and California. While certain states have excelled at developing EV ecosystems, New York is in the middle of the national range, ranking 25th among the 50 states in terms of electric vehicle chargers per capita.
We have also analyzed a variety of policy options dedicated to growing the EVSE market. Policies that ease the permitting and installation process are relatively straightforward and low-cost measures that have proven to be beneficial in other states and in the solar energy market.
Instituting unified statewide permitting, adapting building codes, reducing demand charges, and allowing parking spot lessees to install chargers are just a few of these policies.
Governments can have a massive impact by providing low-cost financing for EV chargers with off-balance-sheet repayment structures like property-assessed clean energy (PACE) or on-bill repayment. This financing would be a significant boon for a market that is not yet sufficiently established to be financeable at low rates.
Higher-cost policy options include lowering the fixed costs of installing charging stations through subsidies or tax credits. Policymakers could achieve a lower-cost approach with the same end goal by facilitating partnerships between market participants who can benefit from a more robust EV charging ecosystem.
To read the full research report, please download this PDF.
Eitan Hochster is a second-year MBA and Master of Environmental Management student at Yale University. He is focused on environmental entrepreneurship with an emphasis on renewable energy and energy efficiency.
This article was originally published on the Clean Energy Finance Forum and was republished with permission.
Lead image: Electric vehicle parking. Credit: Shutterstock